People have expressed concerns that cold fusion might clobber the economy if it lowers the cost of energy dramatically over a short time. I have been thinking about that. No doubt it will clobber the energy industry itself, including oil companies, electric power companies, wind turbine manufacturers and so on. But will it harm other industries? Will it harm the economy as a whole?
To address this, I looked for an energy intensive industry. One that has experienced dramatic cost reductions in the past. Air transportation is a good candidate. Two aspects of it stand out:
- For domestic flights within the U.S., energy costs 20 to 30% of airfare. That is a larger energy cost than most goods and services.
- Since 1950, airfare costs have fallen 85% in inflation adjusted dollars.
Here are some graphs of these trends.
https://www.slideserve.com/kat…werpoint-ppt-presentation p. 36
https://www.iata.org/en/iata-r…raffic-growth---monterey/ p. 22
The axes labels in the second graph are confusing. I think the blue line is the cost per ton-kilometer the airlines pay, and the red line is what they charge passengers.
(Note that passenger traffic is measured in ton-kilometers, estimated at roughly 0.1 ton per passenger, including baggage. In the U.S. this is generally measured in passenger miles.)
As I said, costs and fares declined 85%, an average of 1.2% per year. Most of the declines occurred soon after two dramatic changes: the introduction of jet aircraft in 1960, and deregulation in 1980. The wide-bodied Boeing 747 that carries 490 passengers was introduced in 1969, but it did not have such an immediate effect as the Boeing 707. The largest sustained cost reduction occurred from 1960 to 1972: 60% over 12 years, or 5% per year. We can expect that cold fusion will produce a similar decline in costs. I expect it will be less abrupt: ~30% over 20 years; ~1.5% per year.
The effect will begin immediately after it becomes generally known that cold fusion will replace oil, even though it will take decades to develop cold fusion aerospace engines. It will begin immediately because the announcement of cold fusion will lower the cost of oil. The oil companies will rush to sell their reserves while the oil still has value. They will stop drilling and making new oil tankers and pipelines, reducing their expenses. In other words, they will hold a 20-year-long bankruptcy sale. Oil will be cheaper, but it will never compete with cold fusion. Cold fusion fuel costs nothing. Oil will always cost something, because you have to extract it, ship it, refine it, and distribute it from gas stations.
When cold fusion aerospace engines are introduced, the cost of using them per passenger mile will be far cheaper than kerosene jet engines, because the fuel costs nothing. Even after introduction, the cost will continue to decline. Because equipment manufacturing and maintenance will be cheaper. I base this on predictions for upcoming battery powered electric aircraft engines. They are expected to cost less per kilowatt of capacity, and less to maintain, because they are simpler and cleaner. This is also the case with electric vehicles (EV) compared to gasoline automobiles. This continued decline will happen gradually over decades after the introduction of cold fusion engines.
After cold fusion technology matures and takes over all energy markets, oil will still be needed for chemical feedstock for plastics and other products. However, this demand will be met with synthetic hydrocarbons made with cold fusion. It will be synthesized on site at factories that make plastics, using local sources of water (hydrogen) and carbon (such as wood, coal or garbage). That will be cheaper, easier and safer than drilling and shipping oil.
The 60% rapid fall in airfare in the 1960s was more than offset by the increase in passenger traffic. With cold fusion, airlines and other energy intensive industries will save a lot of money, and with competition they will charge customers less. As long as there is a growing demand for their products, this will not reduce their profits. To be sure, there is a limit to demand for air travel. We would not all want to take a trip by airplane every week.
With cold fusion we will make our own energy instead of paying the oil companies and electric power companies. Some people fear this will bring much of commerce to a halt. It is true we will make our own energy, but we will not make our own airplanes, or fly our own airplanes. We will not make our own automobiles, hot tubs, or any other goods or services that consume a lot of energy. Airfare may fall by ~30% with cold fusion, but it will not fall to zero.
The energy industry is one of the largest in the world, similar to agriculture, weapons production, and war. “In 2021, the U.S. spent $1.3 trillion on energy, or 5.7% of Gross Domestic Product (GDP). On a per capita basis, annual energy costs were $3,967 per person.” (https://css.umich.edu/publicat…s-energy-system-factsheet) Per capita costs include children. A family of 4 will save $16,000 a year. That does not mean the family gets $16,000 directly. This includes money spent by corporations to make products the family buys, and the family's share of energy used by the government, the military and others. Still, the family would save a lot by not buying gasoline, and as the cost of food and manufactured goods falls. The family will spend this money on something other than energy. A better apartment, or college education without student debt. The money will not disappear. It will not be wire transferred to Alpha Centauri.
Military expenditures are $2.2 trillion per year worldwide. (https://www.sipri.org/media/pr…-european-spending-surges) If war were to cease, and spending on weapons reduced to zero, we would not worry about the effect on the economy. We would not fret that this might reduce overall economic activity and leave many people without jobs.
It is difficult to find estimates of worldwide energy costs, but they are approximately $6 or $7 trillion per year. “More than US$6,000 bn -- 10% of the world Gross Domestic Product (GDP) -- is spent each year in the world for energy purposes. This places energy second to health care expenditures in many countries; and in some cases first.” (https://www.enerdata.net/publi…-energy-expenditures.html) Oil is the largest portion, at ~$4 trillion. It will decline rapidly in the next 20 years as EVs replace gasoline vehicles.
There is no reason to fear the gradual decline of the energy industry, as long as it does not happen overnight. It will take 10 or 20 years after the introduction of cold fusion. Machinery cannot be replaced any faster than this. Worldwide GDP is estimated between $86 and $97 trillion. The gradual loss of $7 trillion would make little difference. Other industries will be enhanced by cold fusion, and they will grow more than $7 trillion.
